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Asian Crisis Provides an Opening to Tackle Corruption - The International Herald Tribune

Robert G. Lees
The International Herald Tribune
Saturday, August 22, 1998

HONOLULU — If there is a silver lining to the dark clouds of Asia's financial crisis it might well turn out to be an invigorated commitment to fighting corruption. The intensity of hardship caused by the crisis seems to have reduced the level of tolerance for the economic costs and inefficiencies imposed by graft.

Most diagnoses of the crisis point to corruption as a primary culprit and to its eradication as a key remedy.

Corruption is an insidious virus that infects, to varying degrees, every nation in the world. It eats away at the structural foundations of economies, creating a honeycomb of added costs throughout the entire business environment.

When the outcomes of business transactions are being determined by bribery, influence-peddling and favoritism, rather than by sound business decisions and market forces, the entire economy pays a price.

Corruption exacts a heavy penalty on every segment of society — laborer and business owner, public official and private citizen. It acts very much like a tax on public projects, adding, according to some estimates, as much as 30 percent to the cost.

The Asian Development Bank has calculated that corruption can cost governments as much as 50 percent of their tax revenues and can amount to more than a country's total foreign debt.

Given the precarious fiscal position of many governments in Asia, such huge added costs are unacceptable. Economies can only, and will only, fulfill their potential when openness and transparency are paramount.

Corruption has an ugly by-product. Where it is tolerated, or — worse — encouraged, human rights abuses seem to thrive as well. Such societies are plagued by secrecy, manipulation and outright lying. Cynicism flourishes, public trust evaporates and fundamental rights are all too frequently ignored.

At a time when foreign investment is more critical than ever for Asia, the malign influence of graft can kill any venture before it gets off the ground. It can poison the investment climate for years to come — just ask any business person who has been victimized by corruption.

The senior corporate executives represented in the Pacific Basin Economic Council recently adopted a charter on standards for transactions between business and government. It aims to eliminate corruption from all transactions by promoting integrity, transparency and accountability in transactions between companies and public bodies.

Its provisions cover, among other things, respect for laws and standards, prohibition of improper inducements, financial recording and auditing responsibilities and political contributions.

The council also called on governments to redouble their efforts to ensure complete integrity, transparency and accountability in all business-government transactions.

By upgrading its previous statement on transparency to the status of charter, the council has re-emphasized what it believes is the strong link between good governance and economic growth and the need for prompt and effective action.

The U.S. government and many other governments around the Pacific region seem eager to work with business in the battle against corruption. This type of partnership is essential if the scourge of corruption is to be effectively attacked. Neither side can do it alone.

Many other prominent organizations are also active in the fight. The Organization for Economic Cooperation and Development has ratified its Convention on Combating Bribery of Foreign Public Officials. The Pacific Basin Economic Council has urged all governments in the region to sign, ratify and implement this agreement as early as possible.

The Asian Development Bank recently approved an anti-corruption policy aimed at reducing the enormous costs that systematic, widespread corruption inflict on economies in the Asia-Pacific region. The Organization of American States is also active, concluding the Inter-American Convention Against Corruption.

Business leaders must campaign for an Asia-Pacific culture in which it is impossible for corruption to exist. Partly as a result of the Asian financial crisis, the chances of achieving a regional consensus on this are improving. There is now a widespread and growing recognition, both in government and private industry, that the costs of corruption are intolerable and that firm action must be taken.

The crisis can act as a catalyst for business and government to agree on measures to end corruption. If we succeed the region will have taken a major step toward restoring growth, stability and prosperity.

The writer is secretary-general of the Pacific Basin Economic Council, an association of senior business leaders representing more than 1,100 companies in 20 nations. He contributed this comment to the International Herald Tribune